After Nuclear Deal, Iran Pulls Quick Oil Production Rebound
LINDA WERTHEIMER, HOST:
When the nuclear deal between Iran and world powers was implemented in January, it was widely believed it would take at least a year for the country's oil industry to get back up to speed after years of sanctions. But Iran is confounding the experts and beating expectations. NPR's Jackie Northam reports.
JACKIE NORTHAM, BYLINE: Iran has the fourth largest oil reserves in the world. The sanctions put in place in 2012 hit oil production and exports hard. Many analysts thought the industry, with its aging infrastructure and lack of maintenance, would have a hard time rebounding when sanctions were lifted in January.
JACOB KIRKEGAARD: They have clearly pulled it off. This surprised me as much as anybody else.
NORTHAM: Jacob Kirkegaard of the Peterson Institute for International Economics says Iran's oil industry has done better than expected since sanctions were lifted.
KIRKEGAARD: Both their production levels and their export levels have really increased very, very dramatically since late last year.
NORTHAM: Iran is now on track to restore oil production to pre-sanction levels of 3.5 million barrels a day. That's up more than 20 percent. Robert McNally is president of The Rapidan Group, an energy consulting firm. He says what's striking is the amount of exports has doubled to just over 2 million barrels a day.
ROBERT MCNALLY: The big debate amongst the barrel counters is whether those exports are coming from new production entirely or whether the exports are coming from production, but also drawing down of inventories of oil that had been accumulating, both onshore but also in tankers and so forth.
NORTHAM: Amy Myers Jaffe, an energy specialist at the University California at Davis, says even if the Iranians had been drawing down oil that had stored away during sanctions, it would be running low by now. She says there are two reasons we're likely still seeing high production and export numbers.
AMY MYERS JAFFE: One is that they are running their fields as hard as they can, even if that means it would damage the fields in the long-term. The second thing is that, you know, maybe the Xers were wrong about how damaged their fields are.
NORTHAM: McNally says it's very likely Iran rested or turned off some oil fields during sanctions.
MCNALLY: When you have time to do that, you can reduce your field's productions in a planned, orderly way and make it so that when you turn on the field again - when you open up the spigot, that field will be able to flow.
NORTHAM: The Peterson Institute's Kirkegaard says oil is one of the few areas where Iran has benefited from the nuclear deal. Other things like foreign investment into other sectors has been much slower for fear of violating remaining U.S. sanctions on Iran, which are kept in place because of links to terrorism and human rights abuses.
KIRKEGAARD: This is clearly one area or what market which has not been stifled by these remaining U.S. sanctions.
NORTHAM: But Kirkegaard says those sanctions don't discourage many from buying a tanker or two of Iranian oil. Jackie Northam, NPR News, Washington. Transcript provided by NPR, Copyright NPR.